What Is One Problem with Focusing on the CPI as the Measure

question 84

Multiple Choice

What is one problem with focusing on the CPI as the measure of inflation when conducting monetary policy?

• A)Many elements in the CPI change for reasons unrelated to the state of the Canadian economy.
• B)It is closely related to the value of M2.
• C)Changes in monetary policy have little effect on the CPI,especially in the long run.
• D)The CPI is too stable to accurately reflect the changes occurring in the Canadian economy.
• E)The CPI distorts the value of commercial bank reserves.

---

Definitions:

Plumbers

Individuals skilled in installing and maintaining systems used for potable (drinking) water, sewage, and drainage in plumbing systems; also refers to a covert White House Special Investigations Unit during the Nixon administration.

Daniel Ellsberg

A former United States military analyst who, during the Vietnam War, released the Pentagon Papers, a top-secret Department of Defense study of U.S. political and military involvement in Vietnam, to the public.

South Vietnamese President

The head of state of South Vietnam, officially known as the Republic of Vietnam, during its existence from 1955 until its fall to North Vietnam in 1975.

Thieu

Nguyen Van Thieu was a South Vietnamese military officer and political leader who served as president of South Vietnam from 1965 to 1975.